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The grand jury returned a 112-count indictment against Steve Warshak, company president; his mother, Harriet Warshak; general counsel Paul Kellogg; and former employees Charles Clarke Jr., Steven Pugh and Amar Chavan. A company called TCI Media, which was allegedly used to launder money, was also part of the indictment. The charges include 77 counts of money laundering, 12 counts of mail fraud and four counts of bank fraud (Berkeley president, others indicted for fraud, 2006).
After the Grand Jury indictments were handed down The U.S. Attorney's Office in Cincinnati filed a new complaint against Berkeley Premium Nutraceuticals that included the freezing of various assets worth almost $2 million. The complaint alleged that Berkeley owner Steven Warshak and others participated in a complex, large scale mail and wire fraud operation. This amounted to another felony charge being added to the long list that had already been handed down. The frozen assets include two home lots, several vehicles, a boat and brokerage accounts held by Warshak family members and associates (Feds file new complaint for Berkeley, 2006).
In the end the founder and president of Berkeley Premium Nutraceuticals was found guilty of numerous felony criminal charges that included conspiracy to commit mail, wire and bank fraud plus money laundering. Steve Warshak had been brought up on charges by federal prosecutors for being involved in a scheme to defraud consumers out of $100 million. The jury convicted Warshak of the conspiracy charge, 12 counts of mail fraud, three counts of bank fraud, and 75 counts of money laundering, one count of conspiracy to fraudulently access devices and one count of conspiracy to obstruct official business of the Federal Trade Commission (Mckee, 2008).
"Harriet Warshak was found guilty of conspiracy to commit mail, wire and bank fraud, two counts of bank fraud and six charges of money laundering. In-house Counsel Paul Kellogg was convicted of four counts of conspiracy to commit money laundering, obstruction of Food and Drug Administration proceedings and conspiracy to obstruct Federal Trade Commission matters. Jurors said TCI Media was guilty of 21-counts of money laundering and the Berkeley Corporation was guilty of conspiracy to commit bank, wire and mail fraud, bank fraud, 11-counts of mail fraud, fraudulent access of a device and misbranding products" (Mckee, 2008).
A federal court in Cincinnati sentenced Steve Warshak to 25 years in prison on 93 counts of conspiracy, fraud and money laundering. The U.S. District Judge S. Arthur Spiegel sentenced Warshak to prison and ordered him, along with other defendants, to forfeit all its ill-gotten revenues. The judge went on to say that this case was about greed, and that the company had counted on the reluctance of dissatisfied men to come forward since that would be like admitting that they ordered sexual enhancement products (Enzyte Fraud Gets Company Founder 25 Years, 2008).
Warshak, and others that were convicted on federal fraud charges, were then ordered to forfeit $33 million in assets, including real estate, cars and bank accounts. The jury also ordered the forfeiture of six pieces of real estate, the contents of 22 bank and investment accounts, cars, accounts receivable, an insurance policy and other assets (Steven Warshak, other Berkeley Nutraceuticals officials to forfeit $33M, 2008).
In 2008, Berkeley Premium Nutraceuticals, the Forest Park maker of Enzyte the male enhancement tablets and other supplements, filed for bankruptcy protection from its creditors. The petition for Chapter 11 reorganization was filed in U.S. Bankruptcy Court for the Southern District of Ohio located in Cincinnati. The company stated that it had received a commitment for debtor-in-possession financing, and that it expected to continue normal day-to-day operations through the Chapter 11 reorganization process and sale (Berkeley Nutraceuticals files for Chapter 11 bankruptcy, 2008).
Berkley Premium Nutraceuticals has since been sold to an investment company in Cincinnati. The new owners have changed the name of the company, but have kept the brand names of the products that they are selling. They have removed all false claims from their advertising and are trying to run a legitimate business. The company has recently expanded their operation which has resulted in 500 new jobs being brought to the area (Kubicki Company to buy Berkeley Premium Nutraceuticals, 2008).
Steve Warshak had the right idea when he first started selling his herbal supplements out of a spare room in his house. He had a product that could help those who were in need. Unfortunately, he found greed along with his success and it got the better of him. I agree in total with the outcome of how this turned out. The company was defiantly defrauding its customers and operating under unethical principles. Has they taken the warning that were given to them along the way they could have turned their business around and made it a legitimate and profitable one. Considering that the product is still selling today and the company which is being run under a new name is doing well, the product itself was never faulty, just those who were marketing and selling it.
A well run and ethical company will remember and abide by the three main things that they need to do in order to stay out of trouble. First, they will always tell the truth about the products that they are selling, they will never cheat their customers out of money and they will not let greed get the best of them. Berkley Premium Nutraceuticals was their own worst enemy. They took advantage of their customers by first lying to them about what the products that they were selling could accomplish and then by not telling them about the continuity program for which they were enrolled. Ripping off your customers and then not wanting to make it right with them is the way to not have customers anymore. It is also one of the quickest ways to land you in jail for 25 years resulting in the loss of everything.
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2. Berkeley Premium Nutraceuticals, Inc. (2009). Retrieved June 10, 2009, from Business Courier
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Courier Web site: http://www.bizjournals.com/cincinnati/stories/2006/09/18/daily37.html
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Web site: http://www.bizjournals.com/cincinnati/stories/2005/03/14/daily35.html
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Web site: http://www.bizjournals.com/cincinnati/stories/2006/04/10/daily23.html
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from Business Courier Web site:
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